A financial advisory firm has been charged by the Securities and Exchange Commission with defrauding former professional American football players.
Philip Timothy Howard and Don Warner Reinhard, former principals of Cambridge Capital Group Advisors, allegedly solicited $4.1m from about 20 players to invest in private hedge funds managed by Cambridge, which is based in Tallahassee. About half the players rolled their NFL 401(k) accounts over to the funds.
More than 20% of the players' funds were allegedly misused by the partners, the SEC said Thursday. According to the SEC, Reinhard, Howard and the firm advertised the funds would invest in a variety of instruments but in fact invested almost exclusively in settlement advance loans to more than 70% of Howard's NFL class action clients.
Howard and Reinhard used a significant portion of investor money to line their own pockets"
Close to $1m of the funds were used by Howard to clear his personal mortgage loans and never repaid. Howard and Reinhard also used the funds to pay themselves fabricated broker fees on settlement advance loans to Howard's clients, the SEC said.
The former players first landed in the offices of Howard and Reinhard in the hopes of joining the class-action lawsuit against the National Football League over concussion-related brain injuries, arguing that concussions and other head injuries suffered while playing football had caused them permanent brain injury.
"We allege that Cambridge, Howard and Reinhard defrauded these particularly vulnerable investors, many of whom invested their retirement savings," said Eric I. Bustillo, director of the SEC's Miami regional office. "Instead of investing all of the funds' assets as promised, Howard and Reinhard used a significant portion of investor money to line their own pockets," he told local media.
The SEC's suit seeks permanent injunctions, disgorgement of allegedly ill-gotten gains, prejudgment interest and financial penalties.
Reinhard is serving a prison sentence after being found guilty in 2017 of aggravated child assault.